■ Steven A. Ballmer joined a tiny startup called Microsoft in 1980
at the invitation of his college friend, founder Bill Gates. In a variety
of roles that placed him second only to Gates, Ballmer played a crucial
role in Microsoft's growth into the most powerful force in the
computer industry. He became Microsoft's chief executive officer in
2001. Ballmer's exuberant, aggressive, and highly competitive
personality helped shape the company's strategy and was critical to
its success. Many consider him the author of Microsoft's more
aggressive and questionable tactics, aimed not simply at strengthening
Microsoft but at weakening the competition. Unquestionably, those tactics
achieved results—including both dominance of the software market
and numerous legal challenges over the years. The most prominent legal
challenge was the 1998 antitrust case brought by U.S. Justice Department,
which accused Microsoft of abusing its power as an illegal monopoly.
Additionally, as of 2004 it faced antitrust charges in the European Union.

Steve Ballmer.

A/P Wide World Photos

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COMPETITIVE FROM THE START

Ballmer and his sister, Shelly, grew up in a wealthy suburb of Detroit,
where their father, a Swiss immigrant, had a midlevel management job at
Ford Motor Company. At Detroit Country Day School, which he attended on a
scholarship, Ballmer was perceived as an overachiever. A highly
intelligent and enthusiastic student with a talent for math, he earned a
4.0 grade point average, played on the football and track teams, managed
the basketball team, and participated in various school clubs. He repeated
this experience at Harvard University, where he studied applied
mathematics, managed the football team, and worked on the
Harvard Crimson
newspaper and the university literary magazine. He also played poker with
a classmate, Bill Gates, who dropped out in their junior year to start a
software company.

After earning a BS degree at Harvard, Ballmer spent a year and a half at
Procter & Gamble, marketing brownie and muffin mixes. He entered
Stanford University's Graduate School of Business in 1979, and
after his first year, visited his college friend Gates in Seattle, hoping
for a summer job at Gates's company, Microsoft. Instead, Gates
persuaded him to take a full-time job managing the company's
operations. Ballmer's earliest role was as head recruiter for the
fast-growing firm; although he was not a programmer himself, Ballmer could
recognize technical talent. Not long after Ballmer was hired, Microsoft
signed a contract to create an operating system for IBM's new line
of what eventually would be called personal computers. Under a tight
deadline, Microsoft licensed a program called QDOS from a small Seattle
company, rewrote it, and renamed it MS-DOS.

The roles of the major players were set: Bill Gates and his partner and
cofounder, Paul Allen, oversaw the technical side, while Ballmer handled
the business end. In 1981 Ballmer reorganized the partnership into a
corporate structure in which Gates held 53 percent of the equity, Allen 35
percent, and Ballmer 8 percent. He also implemented a stock option plan
for Microsoft employees, which kept programmers from leaving until their
options vested and would ultimately result in the creation of numerous
"Microsoft Millionaires." Faced with health problems, Allen
left the company in 1983, leaving the team of Gates and Ballmer in charge.

MAKING MICROSOFT

During the 1980s Ballmer headed the development of operating systems, the
core of the company's business. He was quick to realize that the
graphical user interface (GUI) introduced by Apple's MacIntosh in
1984 was a major step toward making personal computers easier to use and
more popular. In addition, it was a potential threat to Microsoft's
goal of making MS-DOS the industry standard. To stave off the competition
and ensure that developers would continue creating applications for the
MS-DOS platform, Microsoft announced Windows, a GUI for MS-DOS, in late
1983. Windows was heavily promoted during the two years between its
announcement and the product's actual release in October 1985,
gaining a reputation as
vaporware
(an industry term for products announced far in advance of any release,
which may or may not actually take place). The Windows interface used the
visual metaphor of a desktop and file folders, which was originally
created at Xerox's Palo Alto Research Center in the early 1970s and
first brought to market by Apple. Although some aspects of the desktop
interface were licensed to Microsoft for use in Windows 1.0, Apple sued
Microsoft in 1988, claiming that the "look and feel" of
Windows 2.0 infringed its copyright. Apple lost this suit in 1992.

Microsoft became a publicly held company in 1986, making Ballmer a
multimillionaire before he turned 30. But Gates and Ballmer were not
solely motivated by wealth; their ambition was for Microsoft to control
every aspect of the software market. They were particularly successful
with the Microsoft Office suite of applications, comprising
word-processing, spreadsheet, and presentation software (Word, Excel, and
PowerPoint, respectively). By 2004 Microsoft Office had achieved a 90
percent market share. Windows 3.0, released in 1990, had finally resolved
many of the technical problems of earlier versions. In 1993 the company
introduced Windows NT, an operating system for mainframes and large
networks, to compete with UNIX. Ballmer was ahead of Gates in recognizing
the importance of the Internet in the early 1990s, and in 1995 the company
launched the Microsoft Network and its own Web browser, Internet Explorer,
to compete with Netscape, one of the earliest browser programs. The launch
of Windows 95, another long-delayed upgrade to the operating system,
became a media event.

LEGAL TROUBLES

But increasing criticism mirrored the company's growth. Many
industry observers expressed the view that Microsoft dominated the market
because of its success at crowding out smaller competitors by any means
available, not because of the quality of its products. Microsoft's
aggressive business practices resulted in a number of legal challenges in
the 1990s. One lawsuit came from Sun Microsystems, which had created the
platform-independent Java Web programming language. Microsoft had licensed
Java from Sun in 1995, and in 1997 Sun sued, claiming that Microsoft had
created a version of Java that was incompatible with non-Windows
platforms. The suit was settled in 2001.

The most serious charges came in 1998, when the U.S. Justice Department
and 18 states joined to prosecute Microsoft on antitrust charges. The case
focused largely on the "bundling" of Internet Explorer with
the Windows operating system, making it difficult to use competing Web
browsers such as Netscape, and on other illegal anticompetitive actions.
The government accused Microsoft of being a monopoly and of using that
monopoly power to illegally expand and protect its Windows operating
system. In 1999 a district court judge ruled that Microsoft was a monopoly
and in 2000 found the company had violated the Sherman Antitrust Act. In
June 2000 the judge ordered that Microsoft be split into two companies.
Microsoft, of course, appealed, and while the appeals court upheld the
monopoly and antitrust rulings, it threw out the order to split up
Microsoft. A tentative settlement that would keep Microsoft intact but
restrict its activities was issued in November 2001. In May 2003 Microsoft
settled with AOL Time Warner, owner of the competing browser Netscape, in
a deal that included a $750 million payment to AOL Time Warner and plans
for the two companies to work together. However, litigation continued: in
2004 the European Union
rejected a settlement offer in its long-running antitrust case against
Microsoft that focused on the bundling of Media Player, its audio and
video software, into Windows. Ballmer, always a passionate, outspoken
advocate for the company and its products, vigorously defended Microsoft
in the media, declaring that the company's only goal was to provide
the best possible products to its customers.

A KEY PLAYER PLANS FOR THE FUTURE

From 1980 to 1998 Ballmer headed several Microsoft divisions, including
operations, operating systems development, and sales and support. In July
1998 he was promoted to president, and in January 2000 he was named chief
executive officer, a position Gates had held since the company began. The
concerns he faced as the new CEO included Microsoft's tarnished
reputation as a fair and ethical competitor; escalating attacks by hackers
pinpointing vulnerabilities in Explorer, Windows, and other products; and
the growing popularity of open-source operating systems like Linux.
Ballmer also found a need for internal changes at Microsoft. Under Gates,
who was more of a technical visionary than a business manager, the company
had been highly centralized. As CEO, Ballmer divided the company into
seven operating divisions, worked to create systematic procedures for
everything from product development to strategic planning to employee and
management evaluation, and revamped the compensation plan by eliminating
stock options in favor of outright grants of restricted stock.

By the early 2000s Microsoft's strategy had shifted away from the
PC-centered approach to focus on Microsoft.net, an architecture based on
XML technology, which would enable the integration of data and
applications. Ballmer viewed this focus on interoperability as a major
shift in the information technology industry, comparable to the
introduction of the graphical user interface in the 1980s. As ever, he
energetically promoted Microsoft's role as the dominant player,
setting the standards and selling the software behind the next big thing
in computing.

Since 1980 Microsoft's growth has been driven by Ballmer's
fierce loyalty and managerial talent. Although he was described as affable
and easygoing, he was best known for a loud, boisterous style, and a
high-energy personality that dominated most interactions. Such exuberance
had its price: in 1991 he damaged his vocal cords at a meeting in Japan by
screaming "Windows!" But the defining characteristic of
Steve Ballmer was his passionate belief in Microsoft Corporation.

See also
entry on Microsoft Corporation in
International Directory of Company Histories
.